Connacher Oil and Gas Limited announces increased offering of First Lien Senior Secured Notes to US$200 million and related pricing



    
    /NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR
    DISSEMINATION IN THE UNITED STATES/
    

    CALGARY, June 11 /CNW/ - Connacher Oil and Gas Limited (CLL - TSX)
announced today it has entered into a definitive agreement to issue and sell
US$200 million face value of 11.75% First Lien Senior Secured Notes due July
15, 2014 ("Notes") at a price of 93.678%, resulting in a yield to maturity of
13.5%. The Notes have been resold through a syndicate of investment banks to
certain institutional investors pursuant to applicable securities law
exemptions. The completion of the Note financing is anticipated to occur on
June 16, 2009 and is subject to the finalization of definitive documentation
and other customary closing conditions.
    Using the June 11, 2009 Bank of Canada noon exchange rate of US$0.9106 =
C$1.00, the net proceeds to Connacher from the sale of the Notes (after
deducting the estimated costs of the transaction) will be approximately
C$199.4 million. The net proceeds will be used for working capital and general
corporate purposes, including to fund a portion of the remaining construction,
drilling and completion costs associated with the construction of Algar, the
Corporation's second 10,000 barrel per day steam-assisted gravity drainage
("SAGD") oil sands project, once a decision is made by Connacher's Board of
Directors to authorize reinstatement of construction at Algar and drilling of
the associated 15 SAGD well pairs. This decision has not yet been finalized.
However, in accordance with Connacher's practice to pre-fund major capital
projects, upon closing of this offering of Notes, net proceeds, together with
current cash balances, including the $163.9 million of net proceeds recently
received from the offering of common shares completed on June 5, 2009, will
clearly position the Corporation to reinstate construction at Algar in a
timely manner, as the Corporation's available cash balances would
substantially exceed the estimated remaining $200 million of construction,
drilling and completion costs for Algar, assuming stable economic conditions.
    It is anticipated that receipt of the net proceeds of the offering of
Notes would eliminate the need for the Corporation to pursue a construction
loan for Algar. Connacher is continuing to advance its negotiations with a
Canadian chartered bank on behalf of a syndicate of proposed lenders to secure
a revolving working capital facility (the "Working Capital Facility"). The
Working Capital Facility, if made available and subject to the meeting of any
funding conditions, would provide additional liquidity and financial
flexibility for the Corporation's normal course business activities. The
availability, terms and conditions of the proposed Working Capital Facility
are yet to be finalized. There can be no assurance that the Corporation will
be able to complete the proposed Working Capital Facility on terms and
conditions acceptable to the Corporation, to the syndicated loan market or at
all.
    Moody's Investors Service ("Moody's") and Standard & Poor's ("S&P") have
recently rated the Notes as B1 and BB-, respectively. Moody's lowered its
rating of the Corporation to Caa1 from B3, while S&P affirmed its rating of
the Corporation of B.

    Connacher Oil and Gas Limited is a Calgary-based integrated oil company.
Its primary upstream production is from oil sands operations at its 10,000
barrel per day Great Divide Pod One SAGD plant in northeastern Alberta. The
Corporation has plans to construct a second similar sized SAGD project in
Great Divide at Algar. It owns conventional Canadian production and reserves,
a downstream operation with a 9,500 barrel per day heavy oil refinery in Great
Falls, Montana and maintains a 24 percent equity stake in Petrolifera
Petroleum Limited (PDP-TSX), a production and exploration company active in
Argentina, Colombia and Peru in South America. Connacher's Common Shares and
convertible debentures are listed for trading on the Toronto Stock Exchange
under the symbol "CLL".

    This press release is not an offer of the Notes in the United States. The
Notes have not and will not be registered under the U.S. Securities Act of
1933, as amended (the "US Securities Act"). The Notes may not be offered or
sold, except to qualified institutional buyers in reliance on the exemption
from registration provided by Rule 144A under the US Securities Act, or to
persons outside the United States in compliance with Regulation S and
applicable Canadian exemptions. Any public offering of securities made in the
United States would be made by means of a prospectus that would be obtainable
from Connacher and that would contain detailed information about Connacher and
management, as well as financial statements.

    Forward-Looking Information

    This news release contains certain "forward-looking information" within
the meaning of applicable securities laws including information regarding
Connacher's proposed offering of Notes and use of proceeds in connection
therewith, the anticipated reinstatement of construction of Algar and the
drilling of 15 SAGD well pairs and the ability of the Corporation to raise
additional financing through the Working Capital Facility. Forward-looking
information is based on the opinions and estimates of management at the date
the information is provided and is subject to a variety of risks and
uncertainties and other factors that could cause actual events or results to
differ materially from those projected in the forward-looking information.
These risks include, but are not limited to risk associated with the oil and
gas industry (e.g. operational risks in development, exploration and
production delays or changes in plans with respect to exploration or
development projects or capital expenditures; the uncertainty of reserve
estimates; the uncertainty of estimates and projections in relation to
production, costs and expenses and health, safety and environmental risks),
the risk of commodity price and foreign exchange rate fluctuations, risks
associated with obtaining, maintaining and the timing of receipt of regulatory
approvals, permits and licenses, uncertainties relating to access to capital
markets and the risk of continuing deterioration of global economic
conditions. In certain circumstances the company may curtail production, defer
expenditures and/or modify its plans with respect to capital expenditures,
which may impact year-end cash balances and net operating income. Additional
risks and uncertainties are described in the company's Annual Information Form
which is filed on SEDAR at www.sedar.com.
    The ability of the company to complete the proposed offering of Notes is
subject to the completion of definitive documentation and the satisfaction of
certain conditions to closing. The current financial crisis has resulted in
severe economic uncertainty and resulting illiquidity in capital markets which
increases the risk associated with the company's financing plans. There can be
no assurance that the company will be successful in completing the proposed
financing. Failure to complete the proposed offering of Notes will require the
company to examine other alternatives for securing the financing needed to
reinstate the construction of Algar. Due to the risks, uncertainties and
assumptions inherent in forward looking information, prospective investors in
the company's securities should not place undue reliance on forward looking
information. Forward looking information contained in this press release is
made as of the date hereof and are subject to change. The company assumes no
obligation to revise or update forward looking information to reflect new
circumstances, except as required by law.





For further information:

For further information: Richard A. Gusella, President and Chief
Executive Officer OR Grant D. Ukrainetz, Vice President, Corporate
Development, Phone: (403) 538-6201, Fax: (403) 538-6225,
inquiries@connacheroil.com, Website: www.connacheroil.com


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